Updated from 10:52 a.m. EDT
( SLR), a leading maker of electronic components for other manufacturers, said Tuesday that it planned to buy its rival,
for about $2.4 billion in cash.
Solectron said it would pay $4.53 a share for NatSteel Electronics' 534 million shares, which trade in Singapore, where the company is based. Solectron plans to finance the deal in part with a stock offering. It expects to close the deal in the next two months.
Shares of NatSteel Electronics have not traded since Friday, and speculation has been rife that a deal was imminent. Singapore's market has long speculated that
, the company's corporate parent, would sell its 33% stake in NatSteel Electronics.
The unit's shares closed at $4.56, above Solectron's offer, but are significantly off the 52-week high of $12.80.
Solectron, based in Milpitas, Calif., said it has received commitments to sell from 43% of NatSteel Electronics' owners, including NatSteel, the largest shareholders. To close the deal, it needs the tender of a total of 50% of the shares.
Investors demonstrated some concerns about the deal. Solectron's shares finished Tuesday regular trading down 94 cents, or 8%, at $44.
The purchase of a rival electronics manufacturing services provider follows a string of acquisitions by Solectron of its best customers' assets. Analysts expect the sector's growth will depend upon equipment manufacturers in a variety of industries -- including communications, networking, computer systems -- selling or contracting their manufacturing work to one-time service companies.
Koichi Nishimura, chairman and chief executive of Solectron, said in a statement that the company's strategy in buying NatSteel Electronics rests on that premise.
"The trend of original equipment manufacturers to outsource their manufacturing and supply-chain needs is now emerging in the Asia/Pacific region," he said. "By acquiring NatSteel Electronics, we at Solectron would further strengthen our presence in this region, expand our capacity and solidify our leadership role in bringing the benefits of outsourcing to companies in Asia."
In the past nine months, Solectron has spent around $2.5 billion on acquisitions, buying operations from
( ALA) and
The securities firm
Deutsche Banc Alex. Brown
projects 25% annual growth for the electronics manufacturing services industry through 2004, based on its prediction of 10% annual growth in hardware demand over the same period and its anticipation of increasing reliance on the industry by so-called original equipment manufacturers.
Deutsche Banc Alex. Brown issued a strong buy rating on Solectron stock earlier this month. The firm has done no recent underwriting for the company, but it owns options on the stock and has a convertible issue outstanding.